BioCardia (BCDA) 10-Q 2020 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-21419

BioCardia, Inc.

(Exact name of registrant as specified in its charter)

Delaware	23-2753988
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

125 Shoreway Road, Suite B 

San Carlos, California 94070

(Address of principal executive offices including zip code)

(650) 226-0120

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 Warrant to Purchase Common Stock	BCDA BCDAW	The Nasdaq Capital Market The Nasdaq Capital Market

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

There were 12,428,794 shares of the registrant’s Common Stock issued and outstanding as of November 5, 2020.

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Part I.	FINANCIAL INFORMATION	4
Item 1.	Unaudited Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	4
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three and nine months ended September 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
Part II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
EXHIBIT INDEX		28
SIGNATURES		29

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q, or report, contains forward-looking statements within the meaning of the U.S. federal securities laws that involve risks and uncertainties. Certain statements contained in this report are not purely historical including, without limitation, statements regarding our expectations, beliefs, intentions, anticipations, commitments or strategies regarding the future that are forward-looking. These statements include those discussed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including “Critical Accounting Policies and Estimates,” “Results of Operations,” “Liquidity and Capital Resources,” and “Future Funding Requirements,” and elsewhere in this report.

In this report, the words “may,” “could,” “would,” “might,” “will,” “should,” “plan,” “ forecast,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “predict,” “potential,” “continue,” “future,” “moving toward” or the negative of these terms or other similar expressions also identify forward-looking statements. Our actual results could differ materially from those forward-looking statements contained in this report as a result of a number of risk factors including, but not limited to, those listed in our Annual Report on Form 10-K for the year ended December 31, 2019, and elsewhere in this report. You should carefully consider these risks, in addition to the other information in this report and in our other filings with the SEC. All forward-looking statements and reasons why results may differ included in this report are made as of the date of this report, and we undertake no obligation to update any such forward-looking statement or reason why such results might differ after the date of this Quarterly Report on Form 10-Q, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BIOCARDIA, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	September 30,			December 31,
	2020			2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,392		$	5,585
Accounts receivable, net of allowance for doubtful accounts of $2 and $2 at September 30, 2020 and December 31, 2019		304			147
Inventory		—			4
Prepaid expenses and other current assets		132			642
Other receivable due from related party		762			—
Total current assets		8,590			6,378
Property and equipment, net		161			181
Operating lease right-of-use asset, net		697			1,065
Other assets		54			54
Total assets	$	9,502		$	7,678
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,208		$	914
Accrued expenses and other current liabilities		2,236			2,561
Current portion of note payable		284			—
Operating lease liability - current		592			528
Total current liabilities		4,320			4,003
Operating lease liability - noncurrent		161			614
Note payable, net of current portion		225			—
Deferred revenue		683			691
Total liabilities		5,389			5,308
Stockholders’ equity:
Preferred stock, $0.001 par value, 25,000,000 shares authorized as of September 30, 2020 and December 31, 2019; no shares issued and outstanding as of September 30, 2020 and December 31, 2019		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 12,428,794 and 6,825,183 shares issued and outstanding as of September 30, 2020 and December 31, 2019		12			7
Additional paid-in capital		117,186			103,433
Accumulated deficit		(113,085	)		(101,070	)
Total stockholders’ equity		4,113			2,370
Total liabilities and stockholders’ equity	$	9,502		$	7,678

See accompanying notes to condensed consolidated financial statements.

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BIOCARDIA, INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Revenue:
Net product revenue	$	8		$	1		$	13		$	139
Collaboration agreement revenue		26			193			86			356
Total revenue		34			194			99			495
Costs and expenses:
Cost of goods sold		—			24			4			321
Research and development		2,474			2,007			7,484			6,392
Selling, general and administrative		1,408			1,390			4,642			4,460
Total costs and expenses		3,882			3,421			12,130			11,173
Operating loss		(3,848	)		(3,227	)		(12,031	)		(10,678	)
Other income (expense):
Interest income		1			17			19			53
Gain on change in fair value of redemption feature embedded in convertible notes		—			52			—			52
Interest expense		(1	)		(112	)		(2	)		(112	)
Loss on extinguishment of convertible notes		—			(521	)		—			(521	)
Other expense		—			(1	)		(1	)		(2	)
Total other (expense) income		—			(565	)		16			(530	)
Net loss	$	(3,848	)	$	(3,792	)	$	(12,015	)	$	(11,208	)
Net loss per share, basic and diluted	$	(0.30	)	$	(0.63	)	$	(1.33	)	$	(2.13	)
Weighted-average shares used in computing net loss per share, basic and diluted		12,618,285			6,030,662			9,059,433			5,263,058

See accompanying notes to condensed consolidated financial statements.

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BIOCARDIA, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(unaudited)

	Common stock					Additional			Accumulated
	Shares			Cost		paid in capital			deficit			Total
Balance at December 31, 2019		6,825,183		$	7	$	103,433		$	(101,070	)	$	2,370
Restricted stock units vested and issued		23,172			—		—			—			—
Share-based compensation		—			—		941			—			941
Net loss		—			—		—			(4,594	)		(4,594	)
Balance at March 31, 2020		6,848,355		$	7	$	104,374		$	(105,664	)	$	(1,283	)
Issuance from sale of common stock, net of issuance costs of $1,160		5,476,190			5		10,335			—			10,340
Restricted stock units issued to settle board compensation obligations		—			—		613			—			613
Restricted stock units issued to settle management bonus obligations		71,624			—		391			—			391
Stock grants to former directors		29,625			—		148			—			148
Share-based compensation		—			—		655			—			655
Net loss		—			—		—			(3,573	)		(3,573	)
Balance at June 30, 2020		12,425,794		$	12	$	116,516		$	(109,237	)	$	7,291
Restricted stock units vested and issued		3,000			—		—			—			—
Issuance costs from sale of common stock in prior quarter		—			—		(67	)		—			(67	)
Share-based compensation		—			—		737			—			737
Net loss		—			—		—			(3,848	)		(3,848	)
Balance at September 30, 2020		12,428,794		$	12	$	117,186		$	(113,085	)	$	4,113
Balance at December 31, 2018		4,845,697		$	5	$	90,148		$	(86,361	)	$	3,792
Restricted stock units vested and issued		2,268			—		1			—			1
Share-based compensation		—			—		690			—			690
Net loss		—			—		—			(3,665	)		(3,665	)
Balance at March 31, 2019		4,847,965		$	5	$	90,839		$	(90,026	)	$	818
Reverse stock split fractional share true up		(494	)		—		—			—			—
Share-based compensation		—			—		696			—			696
Net loss		—			—		—			(3,750	)		(3,750	)
Balance at June 30, 2019		4,847,471		$	5	$	91,535		$	(93,776	)	$	(2,236	)
Restricted stock units vested and issued		25,158			—		—			—			—
Issuance of sale of stock and warrants, net of issuance costs of $1,192		1,741,667			2		9,258			—			9,260
Issuance of stock and warrants from conversion of convertible notes		210,887			—		1,206			—			1,206
Share-based compensation		—			—		756			—			756
Net loss		—			—		—			(3,792	)		(3,792	)
Balance at September 30, 2019		6,825,183		$	7	$	102,755		$	(97,568	)	$	5,194

See accompanying notes to condensed consolidated financial statements.

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BIOCARDIA, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited) 

	Nine months ended September 30,
	2020			2019
Operating activities:
Net loss	$	(12,015	)	$	(11,208	)
Adjustments to reconcile net loss to net cash used in operating activities:
Write-off of inventory		3			54
Depreciation		52			78
Reduction in the carrying amount of right-of-use asset		368			325
Non-cash board compensation expense		115			—
Amortiztion of debt discount on convertible shareholder notes		—			112
Change in fair value of redemption feature embedded in convertible notes		—			(52	)
Loss on extinguishment of convertible notes		—			521
Share-based compensation		2,333			2,142
Changes in operating assets and liabilities:
Accounts receivable		(157	)		171
Inventory		1			43
Prepaid expenses and other current assets		510			265
Other receivable due from related party		(762	)		—
Accounts payable		294			372
Accrued expenses and other current liabilities		715			687
Deferred revenue		(8	)		691
Operating lease liability - current		64			—
Operating lease liability - noncurrent		(453	)		(390	)
Net cash used in operating activities		(8,940	)		(6,189	)
Investing activities:
Purchase of property and equipment		(32	)		(144	)
Net cash used in investing activities		(32	)		(144	)
Financing activities:
Proceeds from sale of common stock		11,500			—
Issuance Costs of the sale of stock		(1,227	)		—
Proceeds from sale of stock and warrants		—			10,452
Issuance Costs of the sale of stock and warrants		—			(1,192	)
Proceeds from loan payable		506			—
Proceeds from convertible loan payable		—			625
Proceeds from the exercise of common stock options		—			—
Net cash provided by financing activities		10,779			9,885
Net change in cash and cash equivalents		1,807			3,552
Cash and cash equivalents at beginning of period		5,585			5,358
Cash and cash equivalents at end of period	$	7,392		$	8,910
Supplemental disclosure for noncash investing and financing activities:
Right-of-use asset obtained in exchange for lease obligation	$	—		$	1,505
Non-cash interest expense accretion to loan payable	$	2		$	—
Issuance of restricted stock units in lieu of 2019 cash bonus obligations	$	391		$	—
Issuance of restricted stock units in lieu of 2018 cash bonus obligations	$	—		$	165
Issuance of restricted stock units in lieu of board cash compensation obligations	$	613		$	—
Issuance of common stock in lieu of board cash compensation obligations	$	148		$	—
Conversion of notes and interest payable to stock and warrants	$	—		$	633

See accompanying notes to condensed consolidated financial statements.

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(1) Summary of Business and Basis of Presentation

(a)	Description of Business
	BioCardia, Inc. (BioCardia or the Company), is a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with significant unmet medical needs. The Company’s lead therapeutic candidate is the CardiAMP® Cell Therapy System, which provides an autologous bone marrow derived cell therapy using a patient’s own cells for treatment in two clinical indications: heart failure that develops after a heart attack and chronic myocardial ischemia. The Company’s second therapeutic platform is the investigational culture expanded bone marrow derived allogenic or “off the shelf” cell therapy using neurokinin-1 receptor positive mesenchymal stem cells for the treatment of cardiac and pulmonary disease. To date, the Company has devoted substantially all its resources to research and development efforts relating to its therapeutic candidates and biotherapeutic delivery systems including conducting clinical trials, developing manufacturing and sales capabilities, in-licensing related intellectual property, providing general and administrative support for these operations and protecting its intellectual property.
	BioCardia also has three enabling device product lines: (1) the CardiAMP cell processing system; (2) the Helix biotherapeutic delivery system, or Helix; and (3) the Morph vascular access product line, or Morph. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.

(2) Significant Accounting Policies

(a)	Basis of Preparation
	The accompanying condensed consolidated balance sheets, statements of operations, shareholders’ equity, and cash flows as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 are unaudited. The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information and on a basis consistent with the annual financial statements and, in the opinion of management, reflect all adjustments which include only normal recurring adjustments, necessary to present fairly its financial position as of September 30, 2020, results of operations for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ended December 31, 2020 or for any other interim period or for any other future year.
	These condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 9, 2020.  The results for the three months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other interim period or for any other future year, particularly in light of the novel coronavirus pandemic, or COVID-19, and its impact on domestic and global economies. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines, causing some businesses to suspend operations and/or experience a reduction in demand for many products from direct or ultimate customers. Accordingly, businesses have adjusted, reduced or suspended operating activities and are continuing to adapt to these changing actions and guidelines. Beginning March 17, 2020, substantially all of the Company’s workforce began working from home. On April 6, manufacturing operations resumed at the Company’s facilities, with substantially all other staff continuing to work from home. While the direct effects of the stay-at-home orders and BioCardia’s work-from-home policies have been largely mitigated during the three months ended September 30, 2020, the overall impact of the pandemic has resulted in disruption to the Company’s business and resulted in delays in the Company’s development programs and regulatory and commercialization timelines. The overall magnitude of the continuing impact will depend, in part, on the length and severity of changing restrictions and other limitations on BioCardia’s ability to conduct the Company’s business. BioCardia’s future research and development expenses and general and administrative expenses may vary significantly if the Company experiences an increased impact from COVID-19 on the costs and timing associated with the conduct of BioCardia’s clinical trials and other related business activities.

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BioCardia’s ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

(b)	Liquidity and Other Risks and Uncertainties
	Going Concern and Liquidity - The Company has incurred net losses and negative cash flows from operations since its inception and had an accumulated deficit of $113.1 million as of September 30, 2020. Management expects operating losses and negative cash flows to continue through at least the next several years. The Company expects to incur increasing costs as it advances its trials and development activities. Therefore, absent additional funding, management believes cash and cash equivalents of $7.4 million as of September 30, 2020 are not sufficient to fund the Company beyond the second quarter of 2021. These factors raise substantial doubt about the Company’s ability to continue as a going concern beyond one year from the date these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
	The Company’s ability to continue as a going concern and to continue further development of its therapeutic candidates beyond the second quarter of 2021, will require the Company to raise additional capital. The Company plans to raise additional capital, potentially including debt and equity arrangements, to finance its future operations. While management believes this plan to raise additional funds will alleviate the conditions that raise substantial doubt, these plans are not entirely within its control and cannot be assessed as being probable of occurring.  If adequate funds are not available, the Company may be required to reduce operating expenses, delay or reduce the scope of its product development programs, obtain funds through arrangements with others that may require the Company to relinquish rights to certain of its technologies or products that the Company would otherwise seek to develop or commercialize itself, or cease operations.
(c)	Use of Estimates
	The preparation of the financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Significant items subject to such estimates and assumptions include share-based compensation, the useful lives of property and equipment, right-of-use assets and related liabilities, incremental borrowing rate, allowances for doubtful accounts and sales returns, derivative instruments, clinical accruals, and inventory valuation.

(d)	Principles of Consolidation
	The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated during the consolidation process.

(e)	Changes to Significant Accounting Policies
	The Company’s significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in its Annual Report on Form 10-K filed April 9, 2020 for the year ended December 31, 2019. There have been no changes to those policies.

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(f)	Recently Issued Accounting Pronouncements
	Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force did not or are not believed by management to have a material impact on the Company’s financial statement presentation or disclosures.

(3) Fair Value Measurement

The fair value of financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The Company follows a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1 – quoted prices in active markets for identical assets and liabilities.

Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table sets forth the fair value of its financial assets measured on a recurring basis as of September 30, 2020 and December 31, 2019 and indicates the fair value hierarchy utilized to determine such fair value (in thousands):

	As of September 30, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	7,501	$	—	$	—	$	7,501

	As of December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	4,637	$	—	$	—	$	4,637

(4) Inventories

Inventories are stated at the lower of cost or net realizable value using the average cost method. Inventories consisted of the following (in thousands):

	September 30,		December 31,
	2020		2019
Raw materials	$	—	$	—
Work in process		—		—
Finished goods		—		4
Total	$	—	$	4

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Write downs for excess or expired inventory are based on management’s estimates of forecasted usage of inventories and are included in cost of goods sold. Charges to cost of goods sold for inventory write-downs, reserve adjustments, scrap, shrinkage, and expired inventories totaled approximately $0 and $1,000 for the three and nine months ended September 30, 2020, respectively. Charges to cost of goods sold for inventory write-downs, reserve adjustments, scrap, shrinkage, and expired inventories totaled approximately $0 and $80,000 for the three and nine months ended September 30, 2019, respectively.

(5) Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

	September 30,			December 31,
	2020			2019
Computer equipment and software	$	157		$	132
Laboratory and manufacturing equipment		550			550
Furniture and fixtures		59			55
Leasehold improvements		332			332
Construction in progress		71			69
Property and equipment, gross		1,169			1,138
Less: accumulated depreciation		(1,008	)		(957	)
Property and equipment, net	$	161		$	181

Depreciation expense totaled approximately $15,000 and $52,000 for the three and nine months ended September 30, 2020, respectively. Depreciation expense totaled approximately $29,000 and $78,000 for the three and nine months ended September 30, 2019, respectively.

(6) Operating Lease Right-of-Use Asset, Net

The Company’s operating lease is a property lease for its laboratory and corporate offices. BioCardia’s lease agreement does not contain any material residual guarantees or material restrictive covenants, nor does it contain an additional lease extension. The Company determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s lease does not provide an implicit rate. The Company used an adjusted historical incremental borrowing rate, based on the information available at the approximate lease commencement date, to determine the present value of lease payments. Variable rent expense is made up of expenses for common area maintenance and shared utilities and were not included in the determination of the present value of lease payments. The Company has no finance leases.

The lease expense for the three and nine months ended September 30, 2020, respectively, was $150,000 and $451,000. The lease expense for the three and nine months ended September 30, 2019, respectively, was $150,000 and $450,000. The cash paid under the operating lease during the three and nine months ended September 30, 2020, respectively, was $158,000 and $473,000. The cash paid under the operating lease during the three and nine months ended September 30, 2019, respectively, was $153,000 and $459,000. On September 30, 2020, the weighted average remaining lease term was 1.25 years, and the weighted average discount rate was 12.05%.

Future minimum lease payments under the operating lease as of September 30, 2020 are as follows (in thousands):

	Operating Lease
	September 30, 2020
Remainder of 2020	$	158
For the year ending December 31, 2021		649
Total undiscounted lease payments		807
Less imputed interest		54
Total operating lease liabilities	$	753

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(7) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):             

	September 30,		December 31,
	2020		2019
Accrued expenses	$	105	$	10
Accrued salaries and employee benefits		843		652
Accrued director compensation		—		648
Accrued clinical trial costs		578		519
Grant liability		620		630
Customer deposits		90		102
Total	$	2,236	$	2,561

(8) Note payable under Paycheck Protection Program

Paycheck Protection Program - On May 1, 2020, BioCardia Lifesciences, Inc. (the “Borrower”), a wholly owned subsidiary of BioCardia, Inc. (the “Company”), entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in the aggregate principal amount of $506,413 pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration. All the funds under the Note were disbursed to the Borrower on May 1, 2020.

In accordance with the requirements of the CARES Act, the Borrower will use the proceeds from the Note in accordance with the requirements of the PPP to cover certain qualified expenses, including payroll costs, rent and utility costs. Interest accrues on the Note at the rate of 1.00% per annum. Under the terms of the agreement the accrued interest payable is approximately $2,000 as of September 30, 2020. The Borrower may apply for forgiveness of amount due under the Note, in an amount equal to the sum of qualified expenses under the PPP, which include payroll costs, rent obligations, and covered utility payments incurred during the eight weeks following disbursement under the Note. On June 5, 2020, the Paycheck Protection Flexibility Act extended the period for qualifying expenses from eight weeks to an optional twenty-four-week period. The Borrower intends to use the entire proceeds under the Note for such qualifying expenses. 

Subject to any forgiveness under the PPP, the Note matures two years following the date of issuance of the Note and includes a period for the first six months during which time required payments of interest and principal are deferred. Beginning on the seventh month following the date of the Note, the Borrower is required to make 18 monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default, including, among others, those relating to breaches of the Borrower’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Borrower, and certain material effects on the Borrower’s ability to repay the Note. On October 7, 2020, the Company applied for forgiveness of the note payable with the Lender.

(9) Stockholders’ Equity

2020 Public Offering on Form S-1 Registration Statement - In May 2020, the Company submitted a Form S-1 Registration Statement (S-1) to the Securities and Exchange Commission (SEC), which was subsequently amended. On June 17, 2020, the Company entered into an underwriting agreement with A.G.P./Alliance Global Partners, as representative of the several underwriters named therein, relating to a firm commitment underwritten public offering pursuant to the S-1, of 4,762,000 shares of common stock, par value of $0.001 per share. The offering price to the public was $2.10 per share. The underwriters were granted a 45-day option to purchase up to 714,190 additional shares of common stock to cover over-allotments. Such option was exercised in full on June 18, 2020. The closing of the offering occurred on June 19, 2020. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $10.3 million.

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Warrants - Set forth below is a table of activity of warrants for common stock and the related weighted average exercise price per warrant.

	Number of		Weighted
	Common Stock		Average
	Warrants		Exercise Price
Balance, December 31, 2019		2,435,807	$	6.36
Warrants for common stock sold		—		—
Warrants for common stock exercised		—		—
Balance, September 30, 2020		2,435,807	$	6.36

 (10) Share-Based Compensation

The share-based compensation expense is recorded in cost of goods sold, research and development, and selling, general and administrative expenses based on the employee's or non-employee’s respective function. No share-based compensation was capitalized during the periods presented. Share-based compensation expense for the three months ended September 30, 2020 and 2019 was recorded as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Cost of goods sold	$	-	$	38	$	-	$	130
Research and development		357		293		1,088		788
Selling, general and administrative		380		425		1,245		1,224
Total stock-based compensation	$	737	$	756	$	2,333	$	2,142

On January 29, 2020 (the “repricing date”), the Company’s Board of Directors repriced certain previously granted and still outstanding vested and unvested stock option awards held by employees, executives and certain service providers of the Company; as a result, the exercise price was lowered to $5.32 per share. No other terms of the repriced stock options were modified, and the repriced stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the repricing, 515,036 vested and unvested stock options outstanding with original exercise prices ranging from $10.05 to $97.21, were repriced.

The repricing on January 29, 2020 resulted in incremental stock-based compensation expense of $569,000, of which $412,000 related to vested employee stock option awards and was expensed on the repricing date, and $157,000 related to unvested stock option awards and is being amortized on a straight-line basis over the approximately three year remaining weighted average vesting period of those awards.

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The following table summarizes the activity of stock options and related information:

	Options outstanding
	Number of shares			Weighted average exercise price		Weighted average remaining contractual term (years)
Balance, December 31, 2019		821,464		$	18.99		6.6
Stock options granted		300,432			3.15
Stock options exercised		—			-
Stock options canceled		(43,083	)		13.19
Balance, September 30, 2020		1,078,813		$	6.04		7.6
Exercisable and vested, September 30, 2020		574,574		$	7.77		6.4

Unrecognized share-based compensation for employee and nonemployee options granted through September 30, 2020 is approximately $2.4 million to be recognized over a remaining weighted average service period of 2.3 years.

Share-Based Compensation (RSUs)

The following summarizes the activity of non-vested RSUs:  

	Number of shares		Weighted average grant date fair value per share
Balance, December 31, 2019		36,981	$	10.56
RSUs granted		338,418		3.99
RSUs vested		97,796		5.99
RSUs forefeited		56,161		3.75
Balance, September 30, 2020		221,442	$	4.26

Unrecognized share-based compensation for employee and nonemployee RSUs granted through September 30, 2020 is approximately $180,000 to be recognized over a remaining weighted average service period of 1.8 years.

On April 24, 2020, the Company granted to certain members of management 113,976 restricted stock units, or RSUs, to settle bonuses earned during the year ended December 31, 2019.

On April 30, 2020, the Company granted 122,997 RSUs to board members to settle $613,000 of board compensation earned from April 2018 to March 2020.  The associated compensation expense was recognized when earned in the previous periods. On September 30, 2020, the Company granted 23,122 RSUs to board members and recognized the $55,000 in stock compensation expense for board service for the three months ended September 30, 2020. On June 30, 2020, the Company also granted 23,123 RSUs to board members and recognized the $55,000 in stock compensation expense for board service for the three months ended June 30, 2020. The number of RSUs granted each quarter is calculated based on $92,500 divided by the greater of $4 or the closing share price of the Company’s common stock on the last trading day of the fiscal quarter. These RSUs represent a contingent right to receive one share of common stock, but for which delivery of the stock will occur on the earlier of the two year anniversary of the grant, the board member’s separation from the Company, a change in control as defined by the 2016 Equity Incentive Plan or the board member’s death. 

On June 8, 2020, the Company issued 29,625 shares of common stock to two former board members to settle $148,000 of board compensation obligations.

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(11) Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding since the effects of potentially dilutive securities are antidilutive due to its net loss position.  

The following outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive: 

	September 30,
	2020		2019
Stock options to purchase common stock		1,078,813		837,308
Unvested restricted stock units		8,200		36,981
Common stock warrants		2,435,807		2,435,807
Total		3,522,820		3,310,096

(12) Income Taxes

During the three and nine months ended September 30, 2020 and 2019, there was no income tax expense or benefit for federal or state income taxes in the accompanying condensed consolidated statement of operations due to the Company’s net loss and a full valuation allowance on the resulting deferred tax assets.

As of September 30, 2020, the Company retains a full valuation allowance on its deferred tax assets in all jurisdictions. The realization of its deferred tax assets depends primarily on its ability to generate future taxable income which is uncertain. The Company does not believe that its deferred tax assets are realizable on a more-likely-than-not basis; therefore, the net deferred tax assets have been fully offset by a valuation allowance. 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Given the Company’s historic tax losses, no benefit is expected as a result of the CARES Act; however, the Company will continue to evaluate the impact of the CARES Act. 

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(13) Related Party Transactions

On April 9, 2020, BioCardia, Inc. (“BioCardia” or the “Company”) entered into a Litigation Funding Agreement (the “Funding Agreement”) with BSLF, L.L.C. (the “Funder”), an entity owned and controlled by Andrew Blank, Chair of BioCardia’s board of directors, for the purpose of funding the Company’s currently pending legal proceedings and any and all claims, actions and/or proceedings relating to or arising from the case captioned Boston Scientific Corp., et al., v. BioCardia Inc., Case No. 3:19-05645-VC, U.S.D.C., N. D. Cal (the “Litigation”). BioCardia seeks imposition of constructive trusts both on the patents naming Ms. Sarna as an inventor and the proceeds received from the sale of nVision to Boston Scientific, as well as damages, including unjust enrichment damages measured by the proceeds received from the sale of nVision to Boston Scientific.

Under the terms of the Funding Agreement, the Funder agreed to fund the legal fees and costs incurred by the Company in connection with the Litigation on and after March 1, 2020 on a non-recourse basis. The Company agreed to repay the Funder from any proceeds arising from the Litigation (the “Litigation Proceeds”), (i) any taxes paid by or imposed upon Funder (other than taxes imposed upon Funder as a consequence of Funder’s income) with respect to the claims, the litigation proceeds or as a consequence of any settlement in connection with the Litigation, if any, plus (ii) an amount, without reduction, set-off or counterclaim, equal to the amount actually paid by the Funder pursuant to the Funding Agreement (the “Actual Funding Amount”) plus (iii) the greater of:

(a) 50% of the remaining Litigation Proceeds, up to three times the Actual Funding Amount; or

(b) 30% of the remaining Litigation Proceeds.

Although the Company is required under the terms of the Funding Agreement to consult with the Funder regarding any settlement in connection with the Litigation and to allow Funder to participate in any real-time settlement negotiations, the Company has the sole and exclusive right to settle on whatever terms it deems acceptable. 

There has been no settlement of this litigation as of September 30, 2020.

The Funding Agreement may be terminated by Funder upon ten days’ written notice to the Company. Funder is obligated to fund only the fees and costs incurred in the Litigation through the end of the month in which the termination notice was served. BioCardia may terminate the agreement upon ten days’ written notice to Funder from and after a failure by Funder to fulfill its obligations under the Funding Agreement if such failure or material breach is continuing at the end of such ten-day period. Under the terms of the agreement, the total due from related party as of September 30, 2020 is approximately $762,000. The $762,000 was subsequently collected on November 4, 2020.

(14) Subsequent Events

Related Party Receivable – As discussed in Note 13, the $762,000 due from BSLF, L.L.C. was collected on November 4, 2020.

Paycheck Protection Program - On October 7, 2020, the Company applied for forgiveness of the note payable with the Lender for $506,413. That application for forgiveness was approved in its entirety on November 7, 2020.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                   

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any and all statements contained in this Annual Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Quarterly Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of our cell therapy systems and our clinical trials, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our ability to raise additional capital, (iv) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC and (vi) the assumptions underlying or relating to any statement described in points (i) – (iv) above. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and elsewhere in this Quarterly Report on Form 10-Q, those listed in our Annual Report on Form 10-K for the year ended December 31, 2019 and those listed in our Quarterly Reports on Form 10-Q for the three months ended March 31, 2020 and for the three and six months ended June 30, 2020. Historical results are not necessarily indicative of future results. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

Overview

We are a clinical-stage regenerative medicine company developing novel autologous and allogenic cell therapies for cardiovascular and pulmonary diseases with large unmet medical needs. We are committed to applying our expertise in the fields of autologous and allogenic cell-based therapies to improve the lives of patients with cardiovascular and pulmonary conditions. Our CardiAMP cell therapy platform provides an autologous bone marrow derived cell therapy (using a patient’s own cells) for the treatment of two clinical indications: heart failure that develops after a heart attack (BCDA-01) and chronic myocardial ischemia (BCDA-02).  Our allogenic cell therapy, derived from donor cells and provided “off the shelf”, is also being advanced for two indications, heart failure (BCDA-03) and for the pulmonary indication of acute respiratory distress that has developed from COVID-19 (BCDA-04).

Our Helix™ Biotherapeutic Delivery System or “Helix” delivers therapeutics into the heart muscle with a helical needle from within the heart.  It enables local delivery of cell and gene-based therapies, including CardiAMP and CardiALLO cell therapies to treat cardiac indications.  The Helix catheter is CE marked in Europe and is under investigational use in the United States as part of our cardiovascular cell therapy development programs. We selectively partner with firms developing other cell, gene and protein therapies utilizing the Helix.  These partnered programs provide additional data, intellectual property rights, and opportunities to participate in the development of combination products for the treatment of heart diseases. Helix is in use or has potential to be used to treat many cardiac diseases including heart failure with reduced ejection fraction, heart failure with preserved ejection fraction, obstructive hypertrophic cardiomyopathy, myocardial infarction, chronic myocardial ischemia, and cardiac conduction disorders. 

Our Morph catheter is designed to enable physicians to navigate through tortuous anatomy, customize the shape of the catheter to the patient’s anatomy and their clinical needs during the procedure, and to have stellar backup support once positioned.  Morph catheters enable our cell therapy procedures and have been commercially available to treat more than ten thousand patients.  A number of Morph guides and sheaths are approved for commercial sale in the United States including the Morph AVANCE™ steerable introducer and the Morph DNA guide. Certain Morph catheter systems are approved in Europe with CE Mark. We anticipate broader commercial availability of the AVANCE steerable introducer in the future and utilization of Morph DNA in our cardiovascular cell therapy clinical programs.

To date, we have devoted substantially all our resources to research and development efforts relating to our therapeutic candidates and biotherapeutic delivery systems, including conducting clinical trials, developing manufacturing and sales capabilities, in-licensing related intellectual property, providing general and administrative support for these operations and protecting our intellectual property. We have also generated modest revenues from sales of our approved products. We have funded our operations primarily through the sales of equity and convertible debt securities, and certain government and private grants.

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We have incurred net losses in each year since our inception. Our net losses were approximately $3.8 million and $12.0 million for the three and nine months ended September 30, 2020, respectively. Our net losses were approximately $3.8 million and $11.2 million for the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, we had an accumulated deficit of approximately $113.1 million. Substantially all our net losses have resulted from costs incurred in connection with our research and development programs, clinical trials, intellectual property matters, building our manufacturing and sales capabilities, and from general and administrative costs associated with our operations. As discussed in more detail under “Liquidity and Capital Resources”, there is substantial doubt about our ability to continue as a going concern within one year after the date this Quarterly Report on Form 10-Q is filed with the SEC, and we plan to raise additional capital, potentially including debt and equity arrangements, to finance our future operations. There can be no assurances as to the availability of capital or the terms on which capital will be available, if at all.

CardiAMP Cell Therapy for Heart Failure and Chronic Myocardial Ischemia

The Company’s lead platform, CardiAMP cell therapy, is an autologous cell therapy being advanced for two indications in pivotal clinical trials: heart failure and chronic myocardial ischemia.

The CardiAMP Heart Failure Trial is a Phase III, multi-center, randomized, double-blinded, sham-controlled study of up to 260 patients at 40 centers nationwide, which includes a 10-patient roll-in cohort. The Phase III pivotal trial is designed to provide the primary support for the safety and efficacy of the CardiAMP Cell Therapy System for this indication (BCDA-01). The trial is active at 23 clinical sites and 81 patients have been enrolled to date. The independent Data Safety Monitoring Board (DSMB) completed a prespecified data review in March 2020, which included the safety follow-up results available for these patients. From this review, the DSMB indicated there were no safety concerns with the study results and recommended that the trial continue as planned. We anticipate another prespecified DSMB interim readout from the trial on December 15, 2020 on all patients enrolled at that time point, which will include a futility analysis on the 60 patients that will have reached one- year follow-up. This event is anticipated to be the first randomized data set including the primary efficacy endpoint reviewed by the DSMB.

The CardiAMP Chronic Myocardial Ischemia Trial is a Phase III, multi-center, randomized, double-blinded, controlled study of up to 343 patients at up to 40 clinical sites. The Phase III pivotal trial is designed to provide the primary support for the safety and efficacy of the CardiAMP Cell Therapy System for this indication (BCDA-02). This therapeutic approach uses many of the same novel aspects as the CardiAMP Heart Failure Trial and is expected to leverage our experience and investment in the heart failure trial. The trial has been activated and we are working towards initial patient enrollment in the fourth quarter of 2020. 

We are continuing to assess the impact of COVID-19 on the enrollment in the CardiAMP trials. Some of our clinical centers stopped performing elective procedures and advised us that they would not be performing elective procedures until restrictions on elective procedures are lifted.  Many centers also delayed patient follow-up visits out of concern for patient exposure to COVID-19.  In alignment with recent FDA guidance on clinical trials, “FDA Guidance on Conduct of Clinical Trials of Medical Products during COVID-19 Pandemic Guidance for Industry, Investigators, and Institutional Review Boards”, we have taken steps to address unavoidable protocol deviations due to COVID-19 illness and/or COVID-19 control measures. Clinical sites remain engaged and most are resuming elective procedures, including enrollment activities in our trial.

The Department of Health & Human Services Centers for Medicare & Medicaid Services, or CMS, has designated that both CardiAMP pivotal trials qualify for Medicare national coverage. Covered costs include patient screening, the CardiAMP Cell Therapy System and procedure, and clinical follow-up at one and two years after the procedure.  Private insurance plans covering 50 million insured Americans follow this CMS reimbursement policy and are similarly anticipated to cover these costs.  This coverage significantly reduces our cost of conducting these pivotal trials.  

ALLOGENIC Cell Therapy for Cardiac and Pulmonary Disease

Our second therapeutic platform is our investigational culture expanded bone marrow derived allogenic, neurokinin 1 receptor positive selected mesenchymal stem cells (NK1R+ MSC). This “off the shelf” mesenchymal cell therapy is being advanced for cardiac and pulmonary disease.

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We are actively working to secure FDA acceptance of an Investigational New Drug (“IND”) application for a Phase I/II trial for our allogenic cells for the treatment of ischemic systolic heart failure (BCDA-03). We are working to receive acceptance of the IND in the fourth quarter of 2020, a critical step to beginning the trial.

The Company also intends to submit an IND for the use of its allogenic cell therapy for Acute Respiratory Distress Syndrome (ARDS) caused by COVID-19. Based on preliminary clinical reports on COVID-19, respiratory failure complicated by ARDs is the leading cause of death for COVID-19 patients. ARDS is a type of respiratory failure characterized by rapid onset of widespread inflammation in the lungs. We are working towards FDA acceptance of the IND in the fourth quarter of 2020.

Financial Overview

Revenue

We currently have a portfolio of enabling and delivery products, from which we have generated modest revenue. Net product revenues include commercial sales of our Morph vascular access system in the US and EU and collaboration agreement revenues include revenue from partnering agreements with corporate and academic institutions. Under these partnering agreements, we provide our Helix biotherapeutic delivery system and customer training and support for use in preclinical and clinical studies.

Cost of Goods Sold

Cost of goods sold includes the costs of raw materials and components, manufacturing personnel and facility costs and other indirect and overhead costs associated with manufacturing our commercial enabling and delivery products, which generate net product revenue.

Research and Development Expenses

Our research and development expenses consist primarily of:

• salaries and related overhead expenses, which include share-based compensation and benefits for personnel in research and development functions;

• fees paid to consultants and contract research organizations, or CROs, including in connection with our preclinical studies and clinical trials and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial management and statistical compilation and analysis;

• costs related to acquiring and manufacturing clinical trial materials;

• costs related to compliance with regulatory requirements; and

• payments related to licensed products and technologies.

We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress of completion of specific tasks using information and data provided to us by our vendors and clinical sites. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and the services are received.

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We plan to increase our research and development expenses for the foreseeable future as we continue the pivotal CardiAMP Heart Failure Trial, advance the pivotal CardiAMP Chronic Myocardial Ischemia Trial, further develop our autologous and allogenic cell therapy candidates. We typically use our employee and infrastructure resources across multiple research and development programs, and accordingly, we have not historically allocated resources specifically to our individual programs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, sales, corporate development and administrative support functions, including share-based compensation expenses and benefits. Other selling, general and administrative expenses include sales commissions, rent, accounting and legal services, obtaining and maintaining patents, the cost of consultants, occupancy costs, insurance premiums and information systems costs.

Other Income (Expense)

Other income and expense consist primarily of interest income we earn on our cash, cash equivalents and investments, and interest charges we incurred in periods during 2019 when we had convertible debt outstanding. 

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various judgements that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not clear from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

We define our critical accounting policies as those that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. Our critical accounting policies are described in Item 2 in our Annual Report on Form 10-K for the year ended December 31, 2019, filed April 9, 2020.

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Results of Operations

Comparison of Three and Nine Months Ended September 30, 2020 and 2019

The following table summarizes our results of operations for the three and nine months ended September 30, 2020 and 2019 (in thousands): 

BIOCARDIA, INC.

Statements of Operations

(In thousands)

	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Revenue:
Net product revenue	$	8		$	1		$	13		$	139
Collaboration agreement revenue		26			193			86			356
Total revenue		34			194			99			495
Costs and expenses:
Cost of goods sold		—			24			4			321
Research and development		2,474			2,007			7,484			6,392
Selling, general and administrative		1,408			1,390			4,642			4,460
Total costs and expenses		3,882			3,421			12,130			11,173
Operating loss		(3,848	)		(3,227	)		(12,031	)		(10,678	)
Other income (expense):
Interest income		1			17			19			53
Gain on change in fair value of redemption feature embedded in convertible notes		—			52			—			52
Interest expense		(1	)		(112	)		(2	)		(112	)
Loss on extinguishment of convertible notes		—			(521	)		—			(521	)
Other expense		—			(1	)		(1	)		(2	)
Total other (expense) income		—			(565	)		16			(530	)
Net loss	$	(3,848	)	$	(3,792	)	$	(12,015	)	$	(11,208	)

 Revenue.    Revenue decreased to $34,000 in the third quarter of 2020 as compared to $194,000 in the third quarter of 2019, due primarily to lower revenue generated from partnering activities during the respective quarters. Revenue decreased to $99,000 in the nine months ended September 30, 2020 as compared to $495,000 in the nine months ended September 30, 2019 primarily due to the reduced volumes of commercial catheter sales as a part of the planned transition to the new AVANCE and Morph DNA product families coupled with lower revenue generating partnering activities during the period.  Net product revenue is expected to be nominal during the fourth quarter of 2020, with growth in 2021, subject to customer demand, production resource availability for the new product families, the timing of FDA clearance for market release of different models and sizes and the resumption of medical procedures by our health care provider customers that have been adversely impacted by the response to the COVID-19 pandemic.

Cost of Goods Sold.    Cost of goods sold decreased $160,000 in the third quarter of 2020 as compared to the third quarter of 2019 and decreased $317,000 in the nine months ended September 30, 2020 compared to September 30, 2019, due primarily to the decrease in net product sales volumes coupled with the increase in raw material inventory reserves in 2019 related to transitioning to production of the new AVANCE™ product family. We expect cost of goods sold to be nominal in the fourth quarter of 2020, with growth in 2021, depending on the timing and demand for the new product family introductions.

Research and Development Expenses.   Research and development expenses increased by approximately $467,000 during the third quarter of 2020 as compared to the third quarter of 2019 and by $1,092,000 in the nine months ended September 30, 2020 as compared to September 30, 2019, primarily due to expenses incurred in the execution of the pivotal CardiAMP Heart Failure and CardiAMP CMI trials and development of our allogenic therapies and other therapeutic programs, which include fees paid to consultants, contract research organizations, additional personnel costs and increased stock compensation expense including the January 29, 2020 option repricing. We expect research and development expenses to increase moderately year over year in 2020 as we advance our trials and further develop BioCardia’s autologous and allogenic cell therapies.

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Selling, General and Administrative Expenses.   Selling, general and administrative expenses for the third quarter of 2020 increased marginally by approximately $18,000, or 1.3% as compared to the third quarter of 2019. Selling, general and administrative expenses in the nine months ended September 30, 2020 increased by $182,000, or 4.0%, as compared to the nine months ended September 30, 2019, primarily due to increased stock compensation, including the January 29, 2020 repricing, coupled with increased insurance premiums and professional service fees, partially offset by the expenses incurred in 2019 associated with the reverse stock split and up listing to the Nasdaq Capital Market. We expect selling, general and administrative expenses to decrease modestly in the fourth quarter of 2020 and be relatively consistent year over year as compared to 2019.

Liquidity and Capital Resources

We have incurred net losses each year since our inception and as of September 30, 2020, we had an accumulated deficit of approximately $113.1 million. We anticipate that we will continue to incur net losses for the next several years.

We have funded our operations principally through the sales of equity and convertible debt and equity securities as well as the cash acquired through our reverse merger transaction that was completed on October 24, 2016, $3.8 million raised from the sale of unregistered securities on December 24, 2018, the $625,000 raised from convertible notes that were issued in July 2019 and that converted in August 2019, the $9.27 million in net proceeds raised from the sale of common stock and warrants in August and September 2019, the $506,000 raised from a promissory note in May 2020 and the $10.3 million in net proceeds raised from the sale of common stock in June 2020. As of September 30, 2020, we had cash and cash equivalents of approximately $7.4 million. 

The following table shows a summary of our cash flows for the periods indicated (in thousands): 

	Nine months ending September 30,
	2020			2019
Net cash provided by (used in):
Operating activities	$	(8,940	)	$	(6,189	)
Investing activities		(32	)		(144	)
Financing activities		10,779			9,885
Net decrease in cash and cash equivalents	$	1,807		$	3,552

Cash Flows from Operating Activities. The increase in overall spending for operating activities of $2.8 million through the third quarter of 2020 compared to the third quarter of 2019 related primarily to increases in payments to third parties involved in our clinical trial and increased professional fees and insurance premiums. We expect spending to increase modestly as we advance the CardiAMP Heart Failure Trial and further develop our therapeutic programs.

Cash Flows from Investing Activities. Net cash used in investing activities of $32,000 through the third quarter of 2020 consisted primarily of purchases of office and computer equipment. Net cash used in investing activities of $144,000 through the third quarter of 2019 consisted primarily of purchases of lab equipment and clean room environmental systems.

Cash Flows from Financing Activities. Net cash provided by financing activities of $10.8 million during the nine months ended September 30, 2020 consisted of $11.5 million in gross proceeds from the sale of common stock in June 2020 less issuance costs of $1.2 million and $506,000 proceeds from the Note (as defined below). Net cash provided by financing activities of $9.9 million during the nine months ended September 30, 2019 consisted of $10.5 million in gross proceeds from the sale of common stock and warrants in August and September 2019, less issuance costs of $1.2 million and $625,000 in proceeds from the convertible notes received in July 2019 that converted in August 2019.

PPP Loan

On May 1, 2020, BioCardia Lifesciences, Inc., our wholly owned subsidiary, entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in the aggregate principal amount of $506,413 pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration. All the funds under the Note were disbursed to us on May 1, 2020.

In accordance with the requirements of the CARES Act, we intend to use the proceeds from the Note in accordance with the requirements of the PPP to cover certain qualified expenses, including payroll costs, rent and utility costs. Interest accrues on the Note at the rate of 1.00% per annum. We may apply for forgiveness of amount due under the Note, in an amount equal to the sum of qualified expenses under the PPP, which include payroll costs, rent obligations, and covered utility payments incurred during the eight weeks following disbursement under the Note. On June 5, 2020, the Paycheck Protection Flexibility Act extended the period for qualifying expenses from eight weeks to an optional twenty-four-week period. We intend to use the entire proceeds under the Note for such qualifying expenses.

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Subject to any forgiveness under the PPP, the Note matures two years following the date of issuance of the Note and includes a period for the first six months during which time required payments of interest and principal are deferred. Beginning on the seventh month following the date of the Note, the Borrower is required to make 18 monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. On October 7, 2020, the Company applied for forgiveness of the note payable with the Lender for $506,413. That application for forgiveness was approved in its entirety on November 7, 2020.

2020 Public Offering of Common Stock

In May 2020, the Company submitted a Form S-1 Registration Statement (S-1) to the Securities and Exchange Commission (SEC), which was subsequently amended. On June 17, 2020, the Company entered into an underwriting agreement with A.G.P./Alliance Global Partners, as representative of the several underwriters named therein, relating to a firm commitment underwritten public offering pursuant to the S-1, of 4,762,000 shares of common stock, par value of $0.001 per share. The offering price to the public was $2.10 per share. The underwriters were granted a 45-day option to purchase up to 714,190 additional shares of common stock to cover over-allotments. Such option was exercised in full on June 18, 2020. The closing of the offering occurred on June 19, 2020. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $10.3 million.

Future Funding Requirements

To date, we have generated modest revenue from sales of our approved products. We do not know when, or if, we will generate any revenue from our development stage biotherapeutic programs. We do not expect to generate any revenue from sales of our cell therapy candidates unless and until we obtain regulatory approval. At the same time, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our therapeutic candidates. In addition, subject to obtaining regulatory approval for any of our therapeutic candidates and potential companion diagnostics, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need additional funding in connection with our continuing operations.

Based upon our current operating plan, we believe that the cash and cash equivalents of $7.4 million as of September 30, 2020 is not sufficient to fund our operations beyond the second quarter of 2021. In order to continue to further the development of our lead therapeutic candidates beyond the second quarter of 2021, we will need to raise additional capital. We plan to raise additional capital, potentially including debt and equity arrangements, to finance our future operations. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our therapeutic candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of our therapeutic candidates.

Our future capital requirements will depend on many factors, including:

• the progress, costs, results, and timing of our clinical trials and related development programs;

• FDA acceptance of our autologous and allogenic therapies for heart failure and other indications;

• the outcome, costs, and timing of seeking and obtaining FDA and any other regulatory approvals;

• the costs associated with securing, establishing, and maintaining commercialization and manufacturing capabilities;

• the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development;

• the ability of our product candidates to progress through clinical development successfully;

• our need to expand our research and development activities;

• the costs of acquiring, licensing, or investing in businesses, products, product candidates and technologies;

• our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

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• the general and administrative expenses related to being a public company;

• our need and ability to hire additional management and scientific, medical and sales personnel;

• the effect of competing technological and market developments; and

• our need to implement additional internal systems and infrastructure, including financial and reporting systems.

Until such time that we can generate meaningful revenue from the sales of approved therapies and products, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stock holders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stock holders. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products or therapeutic candidates or to grant licenses on terms that may not be favorable to us.

Our condensed consolidated financial statements as of and for the three and nine months ended September 30, 2020 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. Due to the factors described above, there is substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued. Our ability to continue as a going concern will depend in a large part, on our ability to raise additional capital. BioCardia’s ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the continuing disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If adequate funds are not available, we may be required to reduce operating expenses, delay or reduce the scope of our product development programs, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, or cease operations. While we believe we have a viable strategy to raise additional funds, there can be no assurances that we will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund our operating needs.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to continue as a going concern, we may be forced to liquidate assets. In such a scenario, the values received for assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules of the Securities and Exchange Commission.

Recent Accounting Pronouncements

See Note 2 of our notes to condensed consolidated financial statements for information regarding recent accounting pronouncements that are of significance or potential significance to us.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks during the three months ended September 30, 2020.

Our exposure to market risk is currently limited to our cash and cash equivalents, all of which have maturities of less than three months. The goals of our investment policy are preservation of capital, maintenance of liquidity needs, and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk or departing from our investment policy. We currently do not hedge interest rate exposure. Because of the short-term nature of our cash equivalents, we do not believe that an increase in market rates would have a material negative impact on the value of our portfolio.

Interest Rate Risk

As of September 30, 2020, based on current interest rates and total borrowings outstanding, a hypothetical 100 basis point increase or decrease in interest rates would have an immaterial pre-tax impact on our results of operations.

Foreign Currency Exchange Risks

We are a U.S. entity and our functional currency is the U.S. dollar. The vast majority of our revenues were derived from sales in the United States. We have business transactions in foreign currencies; however, we believe we do not have significant exposure to risk from changes in foreign currency exchange rates at this time. We do not currently engage in hedging or similar transactions to reduce our foreign currency risks. We will continue to monitor and evaluate our internal processes relating to foreign currency exchange, including the potential use of hedging strategies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, as of September 30, 2020, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of September 30, 2020, our disclosure controls and procedures were, in design and operation, not effective at a reasonable assurance level as a result of the material weakness described below.

Status of Material Weakness

We identified the following material weakness in our internal control over financial reporting during the year ended December 31, 2019:

● The material weakness resulted from a lack of sufficient technical resources to appropriately perform effective and timely review of the accounting for and disclosure of complex non-routine transactions, including the adoption of new accounting standards; and

● The material weakness remains unremediated as of September 30, 2020.

Management has implemented measures designed to improve our internal control over financial reporting and remediate the material weakness, including the following:

● We have enhanced our control processes for identifying and reviewing non-routine transactions, including formalized reviews of these transactions by senior accounting management and more robust documentation of the related conclusions, and required accounting; and 

● We have engaged external consultants to provide expertise and assistance sufficient to evaluate, resolve and document the accounting for complex non-routine transactions and continue to do so on an ongoing basis. 

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Management believes that the measures implemented above will provide an appropriate remediation of the material weakness. However, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. The Company expects that the remediation of this material weakness will be completed prior to December 31, 2020.

We cannot assure you that the measures we are taking will be sufficient to remediate this material weakness or to avoid potential future material weaknesses. If our efforts are not successful, or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence and cause the market price of our common stock to decline.

Changes in Internal Control over Financial Reporting

Other than the material weakness described in this Item 4, there were no changes to our internal control over financial reporting identified in connection with the evaluation required by rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We have three legal proceedings (the “Litigation”) currently pending in Federal Court in San Francisco.  All three proceedings relate to matters we raised in a letter to Ms. Surbhi Sarna, nVision Medical Corporation (“nVision”), a company Ms. Sarna founded, and Boston Scientific Corporation, which acquired nVision, based on BioCardia’s discovery in January 2019 that Ms. Sarna had assigned to nVision a patent and patent applications she had filed while a BioCardia employee.  BioCardia made various claims, including that the patent and patent application rightfully belonged to BioCardia pursuant to Ms. Sarna’s invention assignment agreement, and that the proceeds from the sale of nVision to Boston Scientific rightfully belonged to BioCardia because they were the direct result of Ms. Sarna’s breach of her obligation to assign to BioCardia the patent and patent applications and the use of misappropriated BioCardia trade secrets.

On September 6, 2019, Boston Scientific Corporation, Boston Scientific Scimed Inc, and Fortis Advisors LLC (the “Boston Scientific Parties”) filed the first legal proceeding, a complaint captioned Boston Scientific Corporation, et al. v. BioCardia, Inc.,  Case no. 3:19-05645-VC (the “BSC Action”), seeking declarations that the claims made in BioCardia’s correspondence were without basis.  On October 31, 2019, BioCardia filed a counterclaim against the Boston Scientific Parties and Ms. Sarna for breach of contract, misappropriation of trade secrets and correction of inventorship on the patent assigned to nVision by Ms. Sarna. BioCardia sought imposition of constructive trusts both on the patent naming Ms. Sarna as an inventor and the proceeds received from the sale of nVision to Boston Scientific, as well as damages, including unjust enrichment damages measured by the proceeds received from the sale of nVision to Boston Scientific.

On April 9, 2020, we entered into a Litigation Funding Agreement with BSLF, L.L.C., an entity owned and controlled by Andrew Blank, a member of our board of directors, to fund the Litigation.

On April 23, 2020, BioCardia filed a complaint (the second proceeding) captioned BioCardia, Inc. v. nVision Medical Corporation, Case no. 3:20-02829-VC (the “nVision Action”) arising out of the same transaction as BioCardia’s counterclaims in the BSC Action.  On April 29, 2020 Judge Vincent Chhabria, the Judge who is presiding over the BSC Action, determined at BioCardia’s request that the nVision Action is “related to” the BSC Action and accordingly reassigned the nVision Action to himself.  On May 22, 2020, BioCardia filed an amended complaint in the nVision Action in which it added as defendants the institutional investors (i.e., the VC’s) who funded nVision.

On July 16, 2020 and again on July 23, 2020, combined hearings were held on various motions to dismiss filed by the counter defendants in the BSC Action and the defendants in the nVision Action.  As a result of those hearings, BioCardia was given leave to file Second Amended Counterclaims in the BSC Action and a Second Amended Complaint in the nVision Action.  BioCardia did so on August 20, 2020.

The counter defendants in the BSC Action and the defendants in the nVision Action filed a total of eight motions on September 24, 2020 against BioCardia seeking dismissal of both Actions.  BioCardia filed oppositions on October 26, 2020, and replies are due on November 12, 2020.  A hearing on all eight motions is scheduled for December 3, 2020.

One of the motions to dismiss raised the possibility that BioCardia’s wholly-owned subsidiary, BioCardia Lifesciences, Inc. (itself formerly named BioCardia, Inc.), actually owns the counterclaims asserted in the BSC Action and the claims asserted in the nVision Action.  As a result, on October 23, 2020, BioCardia moved that BioCardia Lifesciences, Inc. be added as an additional counterclaimant in the BSC Action and as an additional plaintiff in the nVision Action.  A hearing on those motions is set for December 3, 2020, at the same time as the hearing on the eight motions filed by opposing parties.  Although BioCardia believes both motions should be granted, in case they are denied BioCardia filed a third proceeding captioned BioCardia Lifesciences, Inc. v. Surbhi Sarna, et al., No. 4:20-cv-07510-KAW (the “BioCardia Lifesciences Action”) asserting the same claims against the same parties who are adverse to BioCardia in the BSC Action and the nVision Action.  BioCardia has asked that the BioCardia Lifesciences Action be related to and therefore assigned to the same judge as in the BSC Action and the nVision Action. BioCardia has informed the Court that it will dismiss without prejudice the BioCardia Lifesciences Action if the motions to add BioCardia Lifesciences as an additional counterclaimant in the BSC Action and as an additional plaintiff in the nVision Action are granted.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition, or future results. The risks described in this report, our Annual Report on Form 10-K for the year ended December 31, 2019, and our Quarterly Reports on Form 10-Q filed periodically with the SEC are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.  

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBIT INDEX

Exhibit Number  Exhibit Description

3.1(1)	Amended and Restated Certificate of Incorporation, as amended May 6, 2019
3.2(2)	Amended and Restated Bylaws
31.1*	Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS+	XBRL Instance Document
101.SCH+	XBRL Taxonomy Extension Schema Document
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.
**	Furnished herewith.
+	The financial information contained in these XBRL documents is unaudited and is furnished, not filed with the Securities and Exchange Commission.
(1)	Previously filed as Exhibit 3.1 to the Form 10-Q for the quarterly period ended June 30, 2019 filed by us on August 14, 2019.
(2)	Previously filed as Exhibit 3.2 to the Current Report on Form 8-K filed by us on April 11, 2017.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BIOCARDIA, INC. (Registrant)
Date:                        November 10, 2020	By:	/s/ Peter Altman
		Peter Altman
		President and Chief Executive Officer
		(Principal Executive Officer)
Date:                        November 10, 2020	By:	/s/ David McClung
		David McClung
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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